PwC’s latest report made available to Nairametrics will be one report Nigeria’s Mining Minister, Kayode Fayemi may not want to see. According to PwC, the top 40 miners in Africa recorded a collective loss in market capitalization of about $27 billion as investors punished the industry for various reasons.
Among the reasons are poor investment, capital management decisions, and in some quarters for squandering the benefits of the boom. The mining industry has been in a commodity down turn for the past three years after enduring years of boom when market prices were high.
The Buhari Administration has outlined its plans to jump-start Nigeria’s mining revolution and may want to draw from the conclusion of this report to ensure the industry attracts investors money. Here is an excerpt of the report;
The 13th in PwC’s industry series analysing financial performance and global trends, the report reveals a first ever collective net loss (US$27bn) for the Top 40 miners with market capitalisation falling by 37%, effectively wiping out all the gains made during the commodity super cycle.
Michal Kotzé, Mining Industry Leader for PwC Africa, says: “Last year was undoubtedly challenging for the mining sector. The Top 40 experienced their first ever collective net loss, their lowest return on capital employed, a significant drop in market capitalisation, and an overall decline in liquidity with the result that the Top 40 were more vulnerable and carrying heavier debt loads than in prior years.”
“We are also seeing shareholders persist with a short term focus, impacting the capital available for investment and, as a result, constraining options for growth.
“But this is a hardy industry, and while many miners may be down they are certainly not out.”
Mine 2016 also found:
Investors punished the Top 40 for poor investment and capital management decisions, and in some quarters for squandering the benefits of the boom.
Concerns over the ‘spot mentality’ from shareholders focused on fluctuating commodities prices and short term returns rather than the long term investment horizon required in mining.
A focus on maximising value from shedding assets as well as mothballing marginal projects or curtailing capacity by Top 40 minters. This is further evidenced by a significant drop off in capex signaling an almost stagnant investment environment.
A positive focus on cost reduction resulting in a 17% drop in operating costs against a backdrop of higher production volumes and lower input costs – an impressive achievement given the production increases seen during 2015.